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The Reserve Bank of India (RBI) launched a scheme to ensure the inclusion, collection and dissemination of the information related to defaulters in the year 1994. During the initial phases of the scheme in question, the concerned individuals collected information pertaining to those individuals who have failed to pay ₹1 Crore or above. Five years later, the apex bank started collecting and then subsequently disseminating the information of those defaulters that owe ₹25 Lakhs or above to registered financial institutions as well.

In order to make the classification process easier, the RBI began dividing the list of defaulters into two categories shortly after. They then came to be known as wilful and non-wilful defaulters, depending on the circumstances which have caused the default. The purpose of this particular scheme was to deduce as to who was genuinely in more debt than they can cover and who was deliberately not choosing to clear what they owe their lenders.

The Meaning of a Wilful Defaulter:

A wilful defaulter is defined as someone who:

 

  • Makes very little to no payments deliberately, in spite of having a good net worth and healthy cash flow

  • Siphons the borrowed funds

  • Misuses the borrowed money for unstated reasons

  • Embellishes information

  • Removes securities without the knowledge of the bank

  • Conducts transactions that are fraudulent in nature

Then, in 2002, the RBI requested banks and financial institutions to send the defaulter data directly to CIBIL. As per the guidelines, the data in question must include information regarding defaulters who owe ₹25 Lakhs or more to the Indian lending institutions.

As of right now, TransUnion CIBIL maintains an elaborate database of all of those suit-filed and non-suit-filed accounts. Out of the same, only the suit-filed accounts can be viewed on their official website by the common public. In the event of the non-suit filed accounts, an individual will need to get themselves registered with TransUnion CIBIL in order to gain access to the information.

 

For the suit-filed accounts, the data is categorised under the subheads of companies, banks, and geographical locations. It must, however, be noted that only a small percentage of the information will be available for the viewing of the general public at any given point in time. This percentage typically comprises of the data concerning wilful defaulters of Rs.1 Crore and above. The purpose of the same was to let other entities know about the track records of the borrowers and take informed decisions with regards to the issuance of credit cards or granting of loans to such defaulters.

How to Remove a Suit-Filed Account From Your CIBIL Report?

If an individual has defaulted on their loan, their bank and/or financial institutions will most probably file a complaint with a court, which will eventually turn into a lawsuit. It is done by banks or financial institutions in order to provide some economic relief to the lender. If the borrower has even crossed the Rs.1 Crore threshold, or, has crossed the Rs. 25 Lakhs mark wilfully, the information concerning it will be made available on the public database as well.

So, how do you Tackle a Suit-Filed Account that has Been Reported to CIBIL?

The first course of action that any defaulter who is looking at a lawsuit can do is settle the case within themselves and within the court’s involvement. It is always advisable that the borrower reaches out to the lender in order to request them to consider that, where the borrower will be typically asked to pay the entire amount due. If the lender actually considers this option, they will be required to report this to the court and simultaneously withdraw the case that was filed against them. However, it must be noted that the case will only be forfeited ahead of the first hearing if the defaulter has settled the loan in its entirety. The bank will also be required to report this to CIBIL and other credit bureaus so that their records eventually reflect the settlement.

On the surface, such a route may seem like a convenient one, but there is something that the borrower/settler must be aware of. If the borrower has been granted a concession on the dues that are owed to the lender, their CIBIL report will include the words ‘settled account’ after the settlement has been done, even though the case has been forfeited. It will remain on their report as a semi-permanent stain that the borrower will only be able to get rid of after 7 years. Such remarks in one’s CIBIL report can cause difficulties for him or her going forward since potential lenders will think twice, or worse, refrain from approving their loan or credit card applications.

In case one cannot pay the amount that they owe their lender, the defaulting borrower can always  try to justify their actions in court. The bank may also then offer a settlement amount which will unquestionably need to be paid off.

How To Avoid The CIBIL Defaulters’ List?

When applying for a personal loan, the credit institution goes through your credit score and credit history to look for any discordance against your name. To avoid being labelled as a defaulter in your report, you need to work on improving your credit score. Here are a few important pointers on how to clear any CIBIL problems and maintain a clean CIBIL record.

  • Assess Your Credit Report

Having a good credit report is crucial to availing any form of credit. If you want to improve your credit report and score, you first need to be aware of your credit transactions and the effects of the decisions you make towards your credit. Hence, it is a good habit to examine your credit history and ensure that all the details in your report are correct. If you find any errors in your credit report, you need to get it rectified at the earliest.

  • Clear Off Your Dues

Defaulted or delayed payments are one of the major reasons for a poor credit score. When an applicant applies for a loan, the lender goes through their credit profile; if the report contains a “settled” or "written-off" status, it will make lenders wary of your creditworthiness, and they might reject the loan application. However, once the outstanding dues are paid off and the credit report gets updated with a new status, the borrower can avail a loan with relative ease.

  • Ensure Timely Bill Payment

Making timely payment of your debts helps build your credit score. On the other hand, missing your payments negatively impacts your credit score. If you want to maintain a good credit score, start paying your loan EMIs before the due date. Paying your bills in a disciplined manner will contribute towards a higher credit score.

  • Spend Within Your Credit Limit

When you apply for credit cards, you get a set credit limit on your card. However, you need to be mindful of the payments you make through this card. It is best to utilize only 50% of your credit limit as spending more will only question your financial ability to pay off your dues. Such credit behaviour also negatively impacts your credit score.

  • Avoid Multiple Loan Application

Multiple loan applications get reflected as hard inquiries, and multiple hard inquiries will make you look like a credit-hungry borrower. Avoid applying for loans even in short durations as this behaviour will also get noticed and may raise suspicion on your creditworthiness. Therefore, you should apply for one loan at a time to make your loan approval process easier.

All of the above-mentioned information will help you improve your CIBIL score and credit report and improve your borrowing experience. At Finserv MARKETS, the loan repayment tenure for a Bajaj Finserv Personal Loan is quite flexible and usually ranges from one to five years. With the Finserv MARKETS app, you can apply for an unsecured personal loan of up to Rs. 25 Lakhs at attractive rates. You can check for pre-approved offers and get access to value-added services like a free credit score and Credit Health Report to help understand your finances.

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FAQs on CIBIL Defaulter List

  • ✔️How many years does CIBIL maintain the record of defaulters?

    CIBIL holds and record the credit report on all individuals. This information is kept for a minimum of 7 years from the date of the first report of delayed payment.

  • ✔️Can a CIBIL defaulter avail a home loan?

    The possibility of availing a home loan is quite low for a credit defaulter. However, it is possible to avail a loan even if the borrower has a low credit score.

  • ✔️How to clear your CIBIL record?

    The following are the pointers to clear your CIBIL record and improve your CIBIL score.

    ●      Cut back on unnecessary spending.

    ●      Check your credit report for errors and get it rectified if found

    ●      Pay your outstanding dues.

    ●      Keep your credit utilization ratio low.

  • ✔️How to remove “Settled” status from your CIBIL report?

    When a borrower is unable to repay a loan amount in full, the lender agrees to a certain settlement amount. However, as the amount is lesser than the total due, the lender reports the loan as “settled”. To change this status, the borrower has to pay the remaining amount and get a NOC (No Objection Certificate) from the lender and file a dispute at CIBIL. The credit bureau will then confirm the information with the financial institution and update the status from "Settled" to "Closed".

  • ✔️How to remove a wrong entry in CIBIL?

    If you find any errors in your report, such as the wrong statement of credit, you can raise a CIBIL Dispute at https://www.cibil.com/dispute/. You are required to fill in some details and mention the corrections in your report. CIBIL will investigate this on its part and correct the details, if applicable.

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